Speedy New LSE Trading System

A little over a year ago, I wrote about the London Stock Exchange’s [LSE]  plan to dump its existing trading system, TradElect, which is based on Microsoft’s Windows and .NET framework, and replace it with a new system based on Linux.  That new system, called Millenium Exchange, is now in its final phase of testing, and is scheduled to go live on November 1.   The LSE decided on the change because of performance and reliability problems with the TradElect system.

The new system has already been put to use in the LSE’s Turquoise electronic “dark pool” trading environment; according to an article in ComputerWorld UK, the new system has set a new speed record for processing trades.

The London Stock Exchange has said its new Linux-based system is delivering world record networking speed, with 126 microsecond trading times.

David Lester, CEO of Turquoise, said that alongside the 126 microsecond average latency, 99 percent of orders would be processed within 210 microseconds, and only 0.1 percent will take longer than 400 microseconds.

Trading speed has become a major competitive issue between the various stock exchanges, because of the rise of automated electronic trading systems.   (Whether these systems are an entirely good thing is another matter.)  With the old system, the LSE had been criticized for sluggish performance and questionable reliability.  At least on the dimension of speed, the new system appears to give the LSE a leg up on its rivals.

Switching to a new system like this is, of course, a complex undertaking.  The LSE has already held one “dress rehearsal” test of the system with its ~300 member firms.   Two more tests of this type are planned before the scheduled live date, November 1; the LSE says that the cut-over might be delayed by a fortnight if member firms experience problems.  Unofficial reports say that the core Millenium system worked just fine in the tests.


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